Thursday 16 August 2018

John McGee: Low-sugar ad rush as tax strikes soft drinks firms

'Ireland and the UK now join a small but elite number of countries that have introduced a sugar tax including the likes of Norway, Hungary, Mexico, France, Denmark, the UAE and Colombia.'
'Ireland and the UK now join a small but elite number of countries that have introduced a sugar tax including the likes of Norway, Hungary, Mexico, France, Denmark, the UAE and Colombia.'

John McGee

For the past 12 months or so, anybody working in the marketing department of a soft drinks manufacturer in Ireland or the UK will have been counting down the days to the introduction of the sugar tax while weighing up the impact it might have on their brands.

In a bid to deal with the rising obesity crisis in Ireland, particularly among children, the so-called Sugar-Sweetened Drinks Tax (SSDT) will come into force in two weeks' time in Ireland, having already been introduced in the UK last week.

In Ireland, the tax will apply at a rate of 30 cent a litre if drinks have over 8g sugar per 100ml while a 20 cent per litre tax will apply if they have between 5g and 8g of sugar per 100ml. This could mean a hike of around 7-10 cent per can or as much as 60 cent per two-litre bottle.

Ireland and the UK now join a small but elite number of countries that have introduced a sugar tax including the likes of Norway, Hungary, Mexico, France, Denmark, the UAE and Colombia.

Not surprisingly, when the tax was formally introduced in the last Budget, soft drinks manufacturers were livid. At the time, they claimed that there was little or no evidence to suggest that such Pavlovian taxes actually work. The industry also claimed that the introduction of a sugar tax will not reduce consumption of soft drinks and, even if it did, it would not make any meaningful dent on the waistlines of Irish consumers.

In the background, however, it is probably fair to say that many soft drinks manufacturers were probably secretly preparing for the inevitability of such a tax as the writing had been on the wall for a long time. As obesity levels in the western world continued to soar, Government interventions were becoming increasingly common while consumer preferences for healthier food and drink products were also becoming the norm.

Given that the soft drinks industry is worth an estimated $286bn globally and €1.4bn in Ireland, there's a lot at stake. For many soft drinks manufacturers, a reformulation of the ingredients to bring them below the tax threshold was always going to be the most likely course of action and over the last 12 months this is exactly what many of them have done. And where brands haven't reformulated, they are now pushing their sugar-free variants - which contain artificial sweeteners - as alternatives.

Some of the major brands have reduced their sugar content to below the threshold in recent months include Ribena, Fanta, Orangina and Lucozade. Elsewhere, some of the brands made by The Coca-Cola Company have also been singled out for some extra love from the marketing department.

Anyone who has seen the recently launched TV ads for Diet Coke called Life's Too Short, Have Diet Coke, for example, will know that Coca-Cola is putting considerable global marketing and advertising clout behind it while at the same time pushing its Coke Zero variant. In addition, the company is also about to embark on a hefty campaign to promote Sprite, which has now gone sugar-free.

But anyone thinking that its flagship and iconic Coca-Cola brand is going to get a slimline makeover, should think again. Staying true to its full-sugar heritage, Coca-Cola is in fact celebrating the fact that it hasn't messed around with the formula with a new campaign that has the strapline: 'They don't make 'em like they used to. We do.'

Speaking to a UK trade publication earlier this week, the Irish marketing director of Coca-Cola GB & Ireland, Aedamar Howlett, justified its decision not to reduce the sugar content because: "It's the original and it's an icon - one which has never been matched or beaten. The 'We do' campaign is a celebration of our heritage and of the truly remarkable drink which has survived over a century and isn't going anywhere soon."

In the new low-sugar soft drinks landscape that is emerging, expect a flurry of marketing activity over the coming months as brands jockey for position in the battle to win over the hearts, minds and taste-buds of consumers.

Not all consumers, however, will be jumping for joy. In Scotland, for example, AG Barr, the maker of Irn-Bru, invoked the wrath of its hardcore brand followers after it reduced the sugar content earlier this year. In a bid to win over the doubters, it recently launched a somewhat provocative campaign to promote the newly reformulated product. 'Don't be a can't, be a can', (you have to say it in a Scottish accent), the campaign urged the nay-sayers, prompting a flood of complaints to the Advertising Standards Authority in the process.

Whether or not consumers actually give a damn is another matt1er. While there is some evidence from other countries that suggests that the introduction of a sugar tax has led to a reduction in the consumption of sugary soft drinks, there is little to link this to a reduction in the levels of obesity. And for the foreseeable anyway, expect opinion to remain deeply divided on the merits, or otherwise, of a sugar tax.

Sunday Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business